DMC/SandT/03/15Owners of Cargo on board "Jutha Rajpruek" v Steamship Mutual
Underwriting Association (Bermuda)
English Court of Appeal: Lord Phillips MR, Longmore and Sedley LJJ.: 10 March
2003Mr A Schaff QC and Dominic Happe instructed by Richards Butler for the
defendant. Nigel Teare QC and Thomas Macey-Dare instructed by More Fisher &
Brown for the claimants.ADMIRALTY: LETTER OF UNDERTAKING: MEANING OF "COMPETENT COURT: WHETHER A
COURT COMPETENT TO ENTERTAIN SUBJECT MATTER OF CLAIM: WHETHER A COURT COMPETENT
BY HAVING BECOME SEIZED OF PROCEEDINGS

Summary
This case concerned the meaning of the term "competent court"
used in a letter of undertaking given by the Steamship Mutual PandI Club on 27
July 2001. The Court of Appeal, upholding the judgment at first instance, held
that a court was competent in respect of in rem proceedings if it could
entertain the subject matter of the claim. It was not necessary that it become
seized of the proceedings by reason of the vessel or a sister ship being
physically within its jurisdiction.

DMC Category Rating: Developed

This case note is based on an Article in the April 2003 Edition
of the ‘Bulletin’, published by the Marine and Insurance teams at the
international firm of lawyers, DLA. DLA is an
International Contributor to this website.

Facts
Cargo owners shipped various general cargoes on the Jutha Rajpruekfrom
Japan and Korea for carriage to Vietnam, Thailand and Malaysia. 28 bills of
lading were involved, which provided a variety of exclusive jurisdiction
clauses. Unfortunately, the vessel suffered an engine breakdown and the master
had to abandon ship. The vessel was salved, general average was declared and
some of the cargo owners provided security in standard form general average
guarantees and bonds. Some of the recovered cargo was found to have sustained
damage.

The shipowners’ P&I Club, the Steamship Mutual, took over
defence of the cargo owners' claims on behalf of the shipowners and by letter of
undertaking undertook to pay on written demand "such sums as may be
finally adjudged by any final unappealable judgment of a competent court or
tribunal to be due from the shipowners in respect of the said claims or as may
be agreed to be recoverable in respect of the said claims…". The Club
also undertook to instruct solicitors to accept service of in rem
proceedings brought "in a competent court" within 14 days of a
written request, without prejudice to the shipowners’ right to contest
jurisdiction, and apply to stay the proceedings. The undertaking was governed by
English law and jurisdiction.

The cargo owners issued a claim form in rem in the
English Admiralty Court, but Steamship Mutual refused to appoint English
solicitors to accept service, arguing that it was only obliged to instruct
solicitors in a jurisdiction where in rem proceedings could be commenced
and pursued to a conclusion. They said that the Admiralty Court failed on two
counts - proceedings could not be commenced because neither the vessel nor a
sister ship came within its jurisdiction, and because proceedings would be
stayed because of the exclusive jurisdiction clauses in the bills.

At first instance, the judge held that "competent court"
meant a court with jurisdiction to hear the claim advanced in in rem
proceedings and that the Admiralty Court had this jurisdiction under the Supreme
Court Act of 1981. The purpose of the letter would be defeated if it only
obliged the Club to accept service in a jurisdiction in which the vessel or a
sister ship was actually present.

The Club appealed, arguing that the letter had not conferred
jurisdiction on any specific court. In the absence of agreement, the Admiralty
Court had no jurisdiction. Only a court in which proceedings could be commenced
by reason of the presence within its territorial waters of the vessel or a
sister ship could be said to be competent.

Judgment
In a leading judgment given by the Master of the Rolls, Lord Phillips, the
Court of Appeal agreed with the judge.

In the context of the letter of undertaking, the natural meaning
of "competent court" could either be a court competent to
entertain the subject matter of the claim or a court competent by virtue of
having become seized of the proceedings. The former interpretation made
commercial sense, whereas the latter, put forward by the Club raised numerous
practical difficulties. At what stage would the vessel or sister ship have to be
within the jurisdiction? When the proceedings are issued? Or when the Club is
called on to instruct solicitors to accept service? Or at any time during the 14
day period for responding to the request? Or when the solicitors are instructed?

In reaching his conclusions, Lord Phillips was influenced by his
own experience of the use of Club guarantees. "Many Clubs," he said,
"while domiciled outside the jurisdiction, are managed in London. Cargo
insurers are also often based in London. Where cargo is damaged, the cargo
interests will wish to obtain security and, if necessary, to found jurisdiction.
Often this is not necessary, for…..the rival interests usually manage to
resolve their differences by agreement. If litigation is necessary, the English
Admiralty Court is often favoured by both parties, whether or not there has been
express prior agreement to this. The Court is preferred not only because it is,
in reality, the "local" court of the interests involved and their
advisers, but also because of its recognised expertise. The terminology used in
the letter of undertaking, with its reference to "solicitors", has, I
suspect, a history that reflects this reality. An agreement which permits cargo
interests to select a suitable court which enjoys Admiralty jurisdiction does
not strike me as in any way surprising."

In consequence, the Club’s appeal was dismissed.

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